Minnesota Economic Indicators
by Dave Senf - david.senf@state.mn.us
February 2010
Note: Except for the Minnesota Labor Market Index, the U.S. Labor Market Index, and the PMI, all over-the-year data are seasonally unadjusted. The most recent data available are for December 2009.
The Minnesota Labor Market Index, using recently revised 2008 and 2009 data, shows Minnesota’s economy bottomed out last June, bounced along the bottom for the next four months, and turned upward the last two months of 2009. The end-of-the-year increase was the first back-to-back monthly jump since 2007. Rising adjusted manufacturing hours with declining adjusted initial claims for unemployment benefits helped the index despite continuing job losses.
The U.S. index increased for the fourth straight month in December indicating that the national economy is also beginning to recover. Minnesota’s index fell 6.4 percent between December 2008 and December 2009 compared to the 8.5 percent nationwide decline. On an annual average basis, Minnesota’s index dropped 14 percent in 2009 while the U.S. index fell 17.5 percent. Minnesota’s previous worst annual average declines were in 1982 and 1975, declining 7.7 and 5 percent respectively. The U.S. index recorded its previous worst declines during those years also, declining 11 percent and 10.6 percent respectively.
Revised data reduced the estimate of jobs lost in 2008 but increased the number during 2009. Minnesota lost seasonally adjusted Wage and Salary Employment for 16 straight months from June 2008 through September 2009 before adding jobs in October. Job loss returned during the last two months of 2009. Nationally, job-loss stretched 22 months from January 2008 through October 2009. The nation added jobs in November but lost jobs in December. Since February 2008, Minnesota lost 157,000 jobs (5.7 percent); 8.3 million were lost nationally (6.1 percent).
Payroll employment decreased 105,000 jobs between December 2008 and December 2009 with job loss spread evenly between goods-producing and service-providing workers. All sectors except educational and health services reduced payroll numbers in 2009.
Adjusted newspaper Help-Wanted Ads shot up for the first time in three years in November but reversed in December plunging 44.4 percent. Printed help-wanted ads were 47.9 percent lower in December compared to a year ago. Minnesota’s online help-wanted ads as compiled by the Conference Board, Inc., were down 9.2 percent over the year. In December online help-wanted ads increased 7.6 and 7.5 percent for Minnesota and the nation respectively, which may be an early sign that hiring may soon pick up.
Minnesota’s Purchasing Managers’ Index lost ground in December sliding to 53.5. The index, however, has been above the growth neutral 50 level for five months in a row indicating that Minnesota’s economic pickup is likely to continue through at least the first half of 2010.
The most promising development in December was the jump in adjusted weekly Manufacturing Hours to 40.2. The factory workweek hasn’t been above 40 hours since October 2008. Longer factory hours indicate that manufacturing production is increasing. Manufacturing firms will eventually ramp up hiring if the production uptick continues.
Adjusted weekly Manufacturing Earnings increased for the seventh straight month in December to $758.95. Factory paychecks haven’t been this big since May 2007.
Adjusted Business Incorporations stumbled for the third consecutive month in December ending the year at 521. Business incorporations for all of 2009 were down 5.5 percent from 2008 making last year the seventh straight year of declining business incorporations. New businesses have turned to the limited liability company form of business registration, increasing 45.1 percent last year, swelling from 21,500 in 2008 to 31,100 in 2009. Last year’s surge was generated in part by a new state law requiring independent contractors to register with the state.
Seasonally adjusted Residential Building Permits retreated in December after climbing the previous two months. Total home-building permits set a record low for the second straight year in 2009 decreasing 14.7 percent below 2008’s level. Residential building permits totaled 9,157 in 2009, down 77 percent from the record high of 40,700 permits in 2004.
Adjusted Initial Claims for Unemployment Benefits (UB) eased for the second-straight month in December, but the volume of claims remains significantly above pre-recession levels. Minnesota’s economy is slowly emerging from the deepest recession in six decades, but the job market is just starting to turn. Total initial claims for UB reached an all-time high in 2009. As a percent of the labor force, however, initial claims last year were below the 1982 percentage. This is consistent with unemployment peaking at 8.4 percent in the 2007-09 recession compared to a 9.1 percent peak in the 1981-82 recession.
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